Introduction
The Goods and Services Tax (GST) system is continuously evolving to improve accuracy, transparency, and efficiency in tax filing. As part of the Phase-III reforms, changes to Table-12 of GSTR-1 and GSTR-1A will come into effect from April 2025. These changes are aimed at simplifying the return filing process, improving data quality, and enabling better tax reconciliation.
In this article, we will walk you through these changes, explain their implications, and guide you on how to stay compliant.
What is Table-12 in GSTR-1 & GSTR-1A?
Table-12 of GSTR-1 and GSTR-1A serves to report the HSN (Harmonized System of Nomenclature) code-wise summary of all outward taxable supplies made by a business. It helps:
| Purpose | Explanation |
|---|---|
| Classify Goods and Services | Ensures that products and services are categorized based on their HSN codes for accurate tax rate application. |
| Provide Tax Insights | Allows businesses and tax authorities to analyze sales data, ensuring proper tax calculations and preventing fraud. |
| Auto-populate Returns | Data from Table-12 is used to auto-populate GSTR-2A and GSTR-2B for ITC reconciliation, ensuring accuracy in input tax credit claims. |
Before the amendments, Table-12 did not clearly segregate the data in a structured way, often leading to mismatches in reporting.
Read More: Understanding the Role of a Casual Taxable Person under GST
Phase-III Changes in Table-12 (Effective April 2025)
From April 2025, several changes will take effect. These changes are aimed at enhancing the precision of data reporting and improving the reconciliation process.
1. Bifurcation of Data into B2B and B2C
The new system requires businesses to segregate their outward taxable supplies into two distinct categories: B2B (Business-to-Business) and B2C (Business-to-Consumer). This will help:
| Category | Description | ITC Relevance |
|---|---|---|
| B2B | Transactions made with registered businesses, eligible for Input Tax Credit (ITC). | ITC eligible for the recipient business. |
| B2C | Transactions made with end consumers who are not registered for GST. | No ITC claim allowed for the consumer. |
Why This Change Matters:
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It helps simplify the process of tracking and verifying ITC claims, reducing the chances of errors during the reconciliation of GSTR-2A.
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It improves the accuracy of reporting and enables tax authorities to better analyze tax data for B2B transactions.
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Clear segregation makes it easier for businesses to distinguish between transactions that are eligible for ITC (B2B) and those that are not (B2C).
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Read More: B2B vs B2C Customer Journey: Differences, Importance and Examples
2. Restriction on Manual Entry of HSN Codes
Under the current system, businesses were allowed to manually input HSN codes in Table-12. However, this sometimes led to errors, such as:
| Previous Process | New Process (Effective April 2025) |
|---|---|
| Manual entry of HSN codes. | HSN codes can now only be selected from a dropdown menu on the GST portal. |
| Error-prone system with inconsistent data. | Use of validated and predefined HSN codes for improved accuracy and consistency. |
Read More: Updates on Mandatory Six-Digit HSN Codes for B2B Transactions and Exporters
Why This Change Matters:
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It reduces human errors and ensures that only valid and correct HSN codes are used for reporting, which minimizes discrepancies.
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It aligns India’s GST system with global trade standards, improving consistency and reducing the risk of fraud.
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Businesses can ensure that they are following the correct code classification, which helps with audit trails and policy enforcement.
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Key Preparation Checklist for Phase-III Changes (Effective April 2025)
Businesses must prepare for these changes in Table-12 to stay compliant. Here’s a checklist to help you get ready:
| Action Item | Explanation |
|---|---|
| Validate HSN Codes for All Products | Ensure that every product or service has an accurate HSN code assigned to it. |
| Update Your ERP/Billing System | Modify your ERP or billing system to capture both B2B and B2C transactions separately. |
| Train Your Team | Educate your team on the new HSN code reporting requirements and the difference between B2B and B2C transactions. |
| Adopt GST-Compliant Software | Use GST-compliant software like CaptainBiz to automate the process and ensure accurate reporting. |
| Review Your SKU Master Data | Ensure your product list is updated with the correct HSN codes and UQC (unit quantity code) for each item. |
Common Errors to Avoid
To ensure compliance and smooth filing of GSTR-1 under the new amendments, avoid the following common mistakes:
| Error | Consequences |
|---|---|
| Using Invalid or Incorrect HSN Codes | Results in rejected returns, fines, and mismatched ITC claims. |
| Not Segregating B2B and B2C Transactions Properly | Incorrect categorization can result in penalties and discrepancies during tax filing. |
| Skipping UQC (Unit Quantity Code) | Missing UQC leads to errors in the quantity calculation of supplies, affecting tax calculations. |
| Not Updating ERP Systems | Failure to update the system causes errors in filing, delays, and possible non-compliance penalties. |
Conclusion
The changes to Table-12 in GSTR-1, effective from April 2025, will improve the accuracy of GST filing and compliance. These reforms are designed to make the process smoother for businesses and tax authorities alike, focusing on better data classification, improved ITC reconciliation, and error reduction.
Key Benefits:
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Better ITC reconciliation: With clear segregation of B2B and B2C data.
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Reduced errors: Thanks to the restriction on manual HSN entry.
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Easier filing: As systems auto-populate data and ensure consistency.
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By preparing now, updating your systems, and educating your teams, you can ensure a smooth transition to the new reporting requirements. Use trusted software solutions like CaptainBiz to automate the process and stay ahead of the curve.
Read More: How Billing Software Reduces GST Filing Errors for Franchise Chains?
FAQs on Table-12 of GSTR-1 (Phase-III Changes)
1. What is the purpose of Table-12 in GSTR-1?
Table-12 is used to report the HSN (Harmonized System of Nomenclature) code-wise summary of outward taxable supplies. It helps tax authorities and businesses classify goods/services and compute accurate tax liabilities.
2. What are the key changes introduced in Table-12 from April 2025?
The major updates include:
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Mandatory bifurcation of B2B and B2C transactions.
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Restriction on manual HSN code entry – only selection from a dropdown is allowed. These changes aim to improve data accuracy and support seamless reconciliation.
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3. Why is B2B and B2C bifurcation important?
It ensures that eligible Input Tax Credit (ITC) is properly tracked and that B2C data is not mistakenly claimed for credit. This segregation simplifies compliance and avoids errors during GSTR-2A reconciliation.
4. Can I still manually enter HSN codes in Table-12?
No. From April 2025, manual entry of HSN codes will be restricted. Businesses must choose codes from the dropdown menu provided on the GST portal to avoid discrepancies.
5. How can I prepare my business for these changes?
Start by:
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Validating all HSN codes for your products/services.
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Segregating your invoices between B2B and B2C.
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Updating your ERP or billing system accordingly.
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Using GST-compliant billing software like CaptainBiz to automate and ensure accurate reporting.
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6. What happens if I use an incorrect HSN code?
Incorrect HSN codes can lead to return rejections, penalties, ITC mismatches, and compliance issues. The new dropdown-based selection will reduce this risk significantly.
7. Is the change applicable to all taxpayers?
Yes, the Phase-III changes to Table-12 apply to all regular GST-registered taxpayers who file GSTR-1 returns starting April 2025.
